REPORT TITLE:
Motor Vehicle Insurance


DESCRIPTION:
Establishes the Aloha State Motor Vehicle Cooperative to provide
mandatory pure no-fault auto insurance, to be purchased at motor
vehicle registration, traffic violation courts, and gas pumps as
determined by the cooperative.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2586
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that Hawaii's economy has
 
 2 been in a state of stagnation for nine consecutive years.  While
 
 3 visitor counts are steady, tax revenues are flat and Japan's
 
 4 economic recovery is still very fragile.  Although, economists
 
 5 indicate the economy has turned the corner and improved slightly,
 
 6 the residents of Hawaii feel the signs of improvement are far,
 
 7 faint, and few between.  This malaise has not only shut down
 
 8 businesses and displaced people from work, but it has eaten away
 
 9 at our collective quality of the life to degrees that cannot be
 
10 quantified.  To worsen matters, our counterparts on the United
 
11 States mainland have enjoyed a booming, robust economy but with
 
12 virtually no spill over effect to benefit Hawaii.
 
13      The legislature believes that for the good of its citizens,
 
14 all means to further improve our economy must be explored.  As
 
15 our current situation indicates, we can no longer depend so
 
16 heavily on the strength of our neighbors to sustain us.  The
 
17 legislature also believes that consumers must first be convinced
 
18 that there remain goods and services that no longer need to be
 
19 imported from abroad.  Consumers must question the need to export
 
20 hard earned dollars for necessities that can be delivered in the
 

 
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 1 State.  The legislature must revisit industries that will keep
 
 2 jobs and capital in Hawaii.  One such service industry is the
 
 3 motor vehicle insurance industry.
 
 4      The legislature finds that the present structure of
 
 5 delivering motor vehicle insurance does not foster fairness,
 
 6 cost-efficiency, and equity.  The current system delivers only
 
 7 approximately 32.5 per cent of paid premium dollars for benefits
 
 8 to claimants.  The rest remains profit for insurance companies,
 
 9 most of which is exported out of State.  Furthermore,
 
10 approximately 23 per cent of Hawaii's drivers do not pay any
 
11 insurance premiums, as has been required by law for decades.
 
12 Victims of motor vehicle accidents not only receive an
 
13 inequitable and paltry 32.5 per cent amount of the premium
 
14 dollars paid for insurance, but along with other law abiding
 
15 insured citizens are forced to pay the cost of the 23 per cent
 
16 who are uninsured.  Uninsured motorists who do not comply with
 
17 law contribute nothing for the privilege of driving.
 
18 Regulations governing insurance company investments are complex
 
19 and do not permit the segregation of capital, surplus, and
 
20 reserves by classes or lines of insurance, in order to determine
 
21 if investments promote the State's economy and welfare of
 
22 Hawaii's citizens.  Accordingly, large sums of motor vehicle
 
23 insurance moneys that could otherwise be invested in development
 

 
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 1 of Hawaii's economy for the promotion of the economic welfare of
 
 2 Hawaii's citizens are not available.
 
 3      The legislature is keenly aware that investment in
 
 4 development of Hawaii's economy is key and vital to the economic
 
 5 welfare of Hawaii's citizens, and that globalization of the
 
 6 world's economy threatens supply of investment dollars in Hawaii.
 
 7 The legislature is also aware that capital investment in Hawaii
 
 8 is most effective where return on investments remain in Hawaii,
 
 9 and that at least one community similarly situated to Hawaii has
 
10 been successful in turning the tables by dedicating and targeting
 
11 moneys for investment in their community.
 
12      The purpose of this Act is to establish the Aloha state
 
13 motor vehicle cooperative to provide mandatory pure no-fault
 
14 motor vehicle insurance, to be purchased at motor vehicle
 
15 registration, traffic violation courts, and gas pumps as
 
16 determined by the cooperative.
 
17      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 
18 a new article to chapter 431 to be appropriately designated and
 
19 to read as follows:
 
20                            "ARTICLE   
 
21                ALOHA STATE MOTOR VEHICLE INSURANCE
 
22      §  -1  Purpose.  The purposes of this chapter are to:
 
23      (1)  Provide for a motor vehicle insurance paradigm which
 

 
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 1           respects and serves the consumer, accident victim, and
 
 2           public interest, and is in harmony with Aloha spirit as
 
 3           described in section 5-7.5;
 
 4      (2)  Resolve insurance problems in respect to uninsured
 
 5           motorists, excessive premiums, unnecessary legal
 
 6           expenses and inherently related inefficiencies and
 
 7           expenses related thereto that result in an inadequate
 
 8           amount of premiums allocated for accident victims;
 
 9      (3)  In respect to Hawaii's economic problems and welfare of
 
10           its citizens, to require the dedication of motor
 
11           vehicle insurance capital, surplus, and reserves to be
 
12           invested in Hawaii for the welfare of Hawaii's citizens
 
13           by declaring motor vehicle insurance to be a public
 
14           necessity affecting public's general welfare;
 
15      (4)  Requiring the establishment of a privately owned motor
 
16           vehicle insurance consumer cooperative and public
 
17           utility as the exclusive seller of mandatory motor
 
18           vehicle insurance;
 
19      (5)  Provide consumers with insurance with reasonable
 
20           protection against risks of liability for personal
 
21           injury and property damages;
 
22      (6)  Sell consumers insurance with actuarially prudent
 
23           premiums, and easier and equitable payments at motor
 

 
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 1           vehicle registration, traffic violation courts, and gas
 
 2           pumps as determined by Aloha state motor vehicle
 
 3           cooperative;
 
 4      (7)  Eliminate the need for uninsured motorist insurance,
 
 5           insurance sales fees and commissions, confusing written
 
 6           fine print insurance policies, and spread costs of
 
 7           damages and expenses equitably amongst all motor
 
 8           vehicle owners and drivers;
 
 9      (8)  Use insurance premium income effectively and
 
10           efficiently for damages and expenses and provide
 
11           accident victims with fair and fast payment of damages;
 
12      (9)  Use profits prudently to benefit consumer; and
 
13     (10)  Invest capital, surplus, and reserves in Hawaii's
 
14           economy for the welfare of Hawaii's citizens.
 
15      §  -2  Definitions.  As used in this chapter:
 
16      "Administrator" means chief executive officer appointed by
 
17 the board.
 
18      "Aloha state motor vehicle cooperative" means motor vehicle
 
19 insurance consumer cooperative.
 
20      "Board" means board of directors of the Aloha state motor
 
21 vehicle cooperative.
 
22      "Collection agent" means the county motor vehicle
 
23 registration offices, traffic violations bureau, courts, fuel
 

 
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 1 dispensers, and other facilities determined by the board.
 
 2      "Consumer" means a motor vehicle insurance buyer.
 
 3      "Consumer cooperative" means an organization owned by and
 
 4 operated for benefit of those using its services.
 
 5      "Damages" means money payments for personal injury or
 
 6 property damage.
 
 7      "Director" means a member of board.
 
 8      "Fuel" means gasoline, diesel oil, or other energy source
 
 9 for motor vehicle.
 
10      "Insurance" refers to private and commercial motor vehicle
 
11 insurance.
 
12      "Insurance income" means income from premiums, interest, and
 
13 investment earnings.
 
14      "Insurer" means an insurance seller.
 
15      "Motor vehicle" means a commercial or private vehicle
 
16 operated by motor, including but not limited to an automobile.
 
17      "Motor vehicle registration" means the motor vehicle
 
18 registration office of each county.
 
19      "Negligence" means failure to use reasonable standard of
 
20 care as determined by law.
 
21      "Outstate" means out of the State of Hawaii.
 
22      "Premium" means the price of pure no-fault motor vehicle
 
23 insurance.
 

 
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 1      "Pure no-fault" means damages paid to victims regardless of
 
 2 fault. 
 
 3      "Retention" means income held in reserve by an insurer
 
 4 pending payments for damages, expenses, and profits.
 
 5      "Retention earning" means earnings from retention deposits
 
 6 and investments.
 
 7      "Victim" means persons injured or whose property is damaged
 
 8 by motor vehicle accident.
 
 9      §  -3  Aloha state motor vehicle cooperative established;
 
10 duties; authority.(a)  Notwithstanding any law to the contrary,
 
11 there is established a privately owned motor vehicle insurance
 
12 consumer cooperative, which shall be deemed a public utility as
 
13 the exclusive seller of pure no-fault motor vehicle insurance in
 
14 Hawaii.
 
15      (b)  The duties of the Aloha state motor vehicle cooperative
 
16 shall be to:
 
17      (1)  Establish a pure no-fault policy of motor vehicle
 
18           insurance, premiums, expenses, investments, and
 
19           profits, subject to prudent actuarial and fiduciary
 
20           standards;
 
21      (2)  Receive, manage, account for and audit all income,
 
22           damage payments, expenses, profits, assets, and
 
23           liabilities; and
 

 
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 1      (3)  Eliminate the need for uninsured motorist insurance.
 
 2      (c)  The Aloha state motor vehicle cooperative shall be
 
 3 exempt from state taxation and the Hawaii property and liability
 
 4 insurance guarantee association.
 
 5      §  -4  Pure no fault.  Effective January 1, 2002, damages
 
 6 shall be paid to accident victims regardless of fault in
 
 7 accordance with a uniform schedule of fair and immediate payment
 
 8 of damages as determined by Aloha state motor vehicle
 
 9 cooperative.
 
10      §  -5  Mandatory insurance.  Effective January 1, 2002,
 
11 every motor vehicle owner and licensed operator of a motor
 
12 vehicle in the State shall purchase a pure no-fault insurance
 
13 policy.  Provisions of the policy including, but not limited to
 
14 minimum coverages and exclusions, shall be determined by the
 
15 Aloha state motor vehicle cooperative for purchase by consumers
 
16 at premiums determined by the cooperative.
 
17      §  -6  Exclusive insurer.  Effective January 1, 2002, the
 
18 Aloha state motor vehicle cooperative shall be the exclusive
 
19 insurer of pure no-fault auto insurance required by Aloha state
 
20 motor vehicle cooperative.
 
21      §  -7  Insurance premiums.  Premiums shall be paid at county
 
22 motor vehicle registration offices, traffic violation bureau,
 
23 courts, and at fuel dispensers, as determined by the Aloha state
 

 
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 1 motor vehicle cooperative.  The Aloha state motor vehicle
 
 2 cooperative shall pay for reasonable expenses incurred by agents
 
 3 collecting the premium, plus two per cent.
 
 4      §  -8  Self sustaining.  The Aloha state motor vehicle
 
 5 cooperative shall be a self-sustaining consumers cooperative
 
 6 operating entirely from premium and investment income; provided
 
 7 that the cooperative may borrow money from the State's general
 
 8 fund or other lenders to be repaid subject to agreements with the
 
 9 lender.
 
10      §  -9  Aloha state motor vehicle cooperative organization;
 
11 requirements.  The Aloha state motor vehicle cooperative shall
 
12 have the following requirements:
 
13      (1)  Be owned by all consumers as members of a consumer
 
14           cooperative, and except for initial board of directors,
 
15           members shall elect board of directors as provided in
 
16           paragraph (2);
 
17      (2)  A board of twelve directors, elected by consumers for
 
18           terms of four years; provided that of the initial
 
19           directors, the governor shall appoint two for four year
 
20           terms, each of the four county mayors shall submit a
 
21           list to the governor from which one shall be appointed
 
22           for two year terms, and speaker of the house of
 
23           representatives and president of the senate shall each
 

 
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 1           submit a list to the governor from which three shall be
 
 2           appointed for six year terms; provided further that
 
 3           thereafter, directors shall be elected by registered
 
 4           motor vehicle owner members every two years, according
 
 5           to procedures determined by the board;
 
 6      (3)  Each director shall be committed to Aloha state motor
 
 7           vehicle cooperative's purposes; provided that except as
 
 8           a consumer, no person may be a director who does
 
 9           business directly with Aloha state motor vehicle
 
10           cooperative, including but not limited to, providing
 
11           accounting, actuarial, administrative, auditing,
 
12           communication, computer, health, hospital, insurance,
 
13           investment, legal, medical, motor vehicle repair, and
 
14           safety services.
 
15      (4)  If a vacancy occurs on the board prior to the next
 
16           scheduled election, the vacancy shall be filled by
 
17           appointment by the board; provided that if a director's
 
18           term ends, director may serve until successor is
 
19           appointed or elected.
 
20      (5)  Removal of a director for good cause by vote of the
 
21           board;
 
22      (6)  Determination of director's fees and expenses necessary
 
23           to carryout the cooperative's business, by vote of the
 

 
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 1           board;
 
 2      (7)  Selection of officers and determination of requirements
 
 3           for meetings, notices, records, and minutes of meetings
 
 4           vote of the board.
 
 5      (8)  Directors and an administrator shall serve as
 
 6           fiduciaries and do whatever is necessary to achieve
 
 7           purposes of this chapter.  Subject to prudent fiduciary
 
 8           and actuarial requirements, including but not limited
 
 9           to the board shall:
 
10           (A)  Hire or retain an administrator to function as
 
11                Aloha state motor vehicle cooperative's chief
 
12                executive officer to implement board's policies
 
13                with regards to pure no-fault insurance policies,
 
14                premiums, damages, expenses, profits, consultants,
 
15                land and office, staff, management, capital and
 
16                finance, and governance factors, without regard to
 
17                chapters 76 and 77;
 
18           (B)  Determine yearly program planning of capital and
 
19                operating budgets of income and expenses, and
 
20                balance sheet of assets, liabilities, and net
 
21                worth;
 
22           (C)  Determine the provisions and requirements of pure
 
23                no-fault policies of insurance providing
 

 
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 1                reasonable protection against risk of liability
 
 2                for personal injury and property damages;
 
 3           (D)  Sell optional coverages and options as determined
 
 4                by board;
 
 5           (E)  Enter into reinsurance agreements for protection
 
 6                against risk of catastrophic damage claims and
 
 7                catastrophe risk exposures;
 
 8           (F)  Determine premiums and the method of collecting
 
 9                premiums at respective county motor vehicle
 
10                registration, traffic violations bureau, courts,
 
11                fuel dispensers, and other facilities;
 
12           (G)  Establish a schedule of uniform payments for
 
13                injuries and property damages;
 
14           (H)  Establish education and safety programs to prevent
 
15                and reduce injury to persons and property;
 
16           (I)  Invest retention reserves and other moneys;
 
17           (J)  Lend or borrow money needed to achieve Aloha state
 
18                motor vehicle cooperative's purposes; and
 
19           (K)  Establish controls, accounting, and audits for all
 
20                money received and disbursed.
 
21           §  -10  Cancellation of policy.  A pure no-fault
 
22 insurance issued under this article shall be deemed canceled and
 
23 shall be canceled automatically without notice for non-payment of
 

 
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 1 premium at motor vehicle registration, traffic violations bureau,
 
 2 court, or revocation or suspension of a person's driver license."
 
 3      SECTION 3.  Article 10C of chapter 431, Hawaii Revised
 
 4 Statutes, is repealed.
 
 5      SECTION 4.  Effective January 1, 2002, every registered
 
 6 motor vehicle and licensed driver shall be insured in accordance
 
 7 with Aloha state motor vehicle cooperative's pure no-fault motor
 
 8 vehicle insurance policy.
 
 9      SECTION 5.  Effective January 1, 2002, damages for personal
 
10 injury and property damages shall be paid to accident victims
 
11 regardless of fault in accordance Aloha state motor vehicle
 
12 cooperative's pure no-fault motor vehicle insurance policies.
 
13 For damages incurred prior to January 1, 2002, payments to
 
14 victims shall be based upon tort liability law effective at time
 
15 of accident.
 
16      SECTION 6.  State departments and every county shall
 
17 cooperate with Aloha state motor vehicle cooperative in the
 
18 collection of motor vehicle insurance premium and administrative
 
19 and enforcement process thereof; provided that state departments,
 
20 the judiciary, and the county shall be paid for reasonable
 
21 expenses incurred in the collection of such premiums and
 
22 administrative and enforcement process thereof.
 
23      SECTION 7.  The Aloha state motor vehicle cooperative shall
 

 
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 1 submit appropriate legislation to carry out this Act to the 2001
 
 2 regular session.
 
 3      SECTION 8.  If any provision of this Act or application of
 
 4 it is deemed invalid, such invalidity shall not affect other
 
 5 valid provisions of this Act.
 
 6      SECTION 9.  This Act shall take effect upon its approval;
 
 7 provided that section 3 shall take effect on January 1, 2002. 
 
 8 
 
 9                           INTRODUCED BY:  _______________________